Housing lawyers warn of “potentially catastrophic” impact of fixed recoverable costs on legal aid providers

Government plans to extend fixed recoverable costs (FRC) to all civil cases in the fast track up to a value of £100,000 risks the collapse of legal aid in housing cases.

That warning has come from the Legal Aid Practitioners’ Group of the Housing Law Practitioners’ Association.

A report for the group by consultancy Hawke Legal said: “We believe that, despite its previous consultation, the government is unaware of the potentially catastrophic financial effect the proposed FRC structure would have on legal aid providers that could lead to a collapse of legal aid in the housing category of law.”

The report said legally aided housing and disrepair cases conducted under conditional fee arrangements would be affected by the change.

Many citizens eligible for legal aid would be denied access to justice due to a lack of available legal aid practitioners under the changes, it said.

The FRC already operates in most low value personal injury cases and prescribes the level of costs that can be claimed back from a losing party in civil litigation by reference to a grid of costs based on the value and complexity of the case.

Among the reports findings were that the overall effect of the change from inter partes costs to FRCs would significantly reduce the income of legal aid providers, on average by 25%.

On a sample of 131 typical cases, Hawke Legal identified a fall in average fees (excluding counsel’s fees) from £10,583 per case to £5,588 equivalent to 47%.

It found the average income of a law centre or other not-for-profit providers would fall by 20% and the average income of a private practice provider by 23%.

“It appears likely that the reduction in viability caused by FRCs would lead to solicitors firms and not-for-profit organisations closing their housing departments,” the report said.

“This in turn would reduce economies of scale, so that central overheads would not be able to be absorbed by other departments. This could lead to some legal aid providers ceasing to practise altogether.”

In a letter to junior justice minister James Cartlidge - copied to other relevant ministers, shadow ministers and key civil servants - the association said: “FRCs are likely to devastate the tenant and borrower facing housing law sector.”

It went on to say the implications cut across many of the Government’s levelling up priorities, and said signatories were “of the view there is no greater threat at present to access to justice for renters and borrowers than fixed recoverable costs”.

The letter was also signed by Shelter, the Law Centres Network and Generation Rent.

Then Lord Chancellor Robert Buckland said in September 2021 the government would extend the FRC regime to cover most fast track claims up to a value of £25,000 and expand the fast track to include most ‘intermediate’ money claims valued between £25,000 and £100,000.

He said at the time the costs of lower value civil claims were “too uncertain” and “without being able to predict what the costs may be, it is difficult for either side to take an informed decision on the best way forward.

“We want cases to be resolved as early as possible, including those that proceed to litigation, with costs that are certain, proportionate, and fair to both sides.”

Mark Smulian